Norway Unexpectedly Withdraws Cash From Massive Wealth Fund
This being the case, it is understood that this surprise withdrawal follows the fall in the price of oil to a minimum of 7 months.
Certainly, Norway unexpectedly took almost $ 400 million from its sovereign wealth fund in August, marking the first withdrawal in more than a year, as the largest oil producer in Western Europe takes advantage of its huge piggy bank amid a decrease in the prices of Petroleum. The government made its first withdrawal in 2016, after a collapse in crude oil prices. The huge fiscal buffer represented by the fund has helped the central bank of Norway avoid some of the extreme monetary stimuli that their peers have had to resort to.
Thus, it is necessary to indicate that the aforementioned withdrawal occurs before the oil prices fell to a minimum of seven months at the beginning of August.
The balance between oil revenues
It is understood that the withdrawal was made in order to maintain a balance between oil revenues and oil money spending this year, at least, that is what the Ministry of Finance says.
Actually, the ministry said “New information also suggests that more withdrawals will be necessary in the coming months”, and also add, “As cash flow from oil output will decline, and since the fund has become so large, it will become more common for transfers to go from the fund. Eventually it will become the new normal ”.
Still, the August withdrawal of the wealth fund is a surprise. And it is that the government said in its revised budget in May that it expects to deposit a total of 34 billion crowns ($ 3.7 billion) in the fund in 2019. The withdrawal brings net deposits until August to 19.9 thousand millions of crowns, which puts the government a little out of the way to reach the goal for the year.
Meanwhile, Brent reference crude fell to around $ 56 per barrel in early August amid concerns about the impact of trade wars and the slowdown in global growth in oil demand. That is well below government estimates in the revised budget, which assumed oil prices between $ 67 and $ 70 per barrel between August and the rest of the year, bringing the average annual price forecast to 559 crowns per barrel, or about $ 61 per barrel at today’s exchange rate.
Source: Mikael Holter and Sveinung Sleire | Bloomberg